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Licensed Unlicensed Requires Authentication Published by De Gruyter June 9, 2017

A non-monotonic relationship between public debt and economic growth: the effect of financial monopsony

  • Mark A. Roberts EMAIL logo


A small amount of fixed-interest public debt may raise economic growth, if the financial sector is monopsonistic. We show that there are also redistributive gains favouring financial outsiders, defined by their lack of access to a stock exchange. The requirements are that issuing public debt raises the monopsony interest rate, thus reduces the value of financial sector equity, which, like public debt, is another source of crowding-out.

JEL Classification: E62; H63.

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Published Online: 2017-6-9

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